Millions of drivers mis-sold car finance agreements must now wait until at least 2027 to receive compensation, according to the Financial Conduct Authority (FCA). The delay is due to ongoing legal challenges to the compensation scheme, initially expected to provide average payments of about £829 per affected individual.
Who is eligible for car finance compensation?
The compensation scheme impacts approximately 12 million car loans, which represent over 40% of all loans issued between April 2007 and November 2024. This applies to both new and many second-hand vehicles purchased through finance agreements, where customers pay an initial deposit followed by monthly fees with interest.
Those eligible for compensation include customers who were subjected to discretionary commission arrangements (DCAs), where car dealers received commissions based on the interest rate charged to customers. The FCA banned these deals in 2021 due to the potential for higher interest rates being charged without customer knowledge.
How much compensation can victims expect?
Under the FCA's latest proposal, victims of mis-sold agreements could receive average compensation of £829. The total cost of the compensation scheme, including administrative expenses, could reach £9.1 billion. However, individual payouts will vary depending on the specific circumstances and harm suffered by each consumer.
